ETFs not 'at the heart' of U.S. market selloff -Fed's Powell

Feb 27 (Reuters) - The U.S. Federal Reserve is “looking into” whether exchange-traded funds (ETFs) influenced the stock selloff earlier this month, but the investments were not likely “at the heart” of what happened, Chairman Jerome Powell said on Tuesday.

The S&P 500 fell 10 percent from Jan. 26 to Feb. 8 in a decline investors linked to fears about rising bond yields and higher inflation. Some analysts said the propensity of stocks to rise and fall in unison is exacerbated by the popularity of index-tracking funds that own entire markets.

“I don’t think they were particularly at the heart of what went on, on those days,” Powell said in response to a question from a congressman during his first testimony as Fed chair, noting the Fed has “looked carefully” to understand what happened during the selloff.

“It’s something we’re talking to our fellow agencies - particularly the SEC I think would be best positioned to look at this - but it’s a question that we’re looking into.”

The Securities and Exchange Commission, which oversees funds, did not immediately respond to a request for comment. The Fed also regulates banks that manage, trade or own ETFs.

Regulators have been scrutinizing various actors in the selloff, including complex products, some of them ETFs, that bet on market volatility remaining low and which recorded substantial losses. (Reporting by Trevor Hunnicutt; Editing by Andrea Ricci)